Fed’s last Operation Twist sale of 2011 later in session
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices recovered gains Wednesday, pushing 10-year yields under 2%, after Italy received good demand for its debt auctions at much lower yields than last month’s sales.
Yields on 10-year notes 10_YEAR -0.80% , which move inversely to prices, fell 3 basis points too 1.98%. A basis point is one one-hundredth of a percentage point.
Yields on 30-year bonds 30_YEAR -0.79% declined 2 basis points to 3.02%.
Two-year yields 2_YEAR 0.00% edged up 1 basis point to 0.29%.
The Italian government sold 9 billion euros ($11.8 billion) of six-month bills at an average yield of 3.25%, down from more than 6.5% at a sale of six-month bills in late November. Bids exceeded demand 1.7 times versus 1.5 times at the November sale. Read more on Italy’s debt sale, the euro.
“Today’s Italian auction results were clearly a constructive sign for the sovereign’s credit and arguably a bigger test of sentiment than tomorrow’s longer-dated supply,” said Ian Lyngen, senior government bond strategist at CRT Capital Group.
Long-term bonds had some support during the Asian session from very weak Japanese economic data. Read about Japanese data .
The only event for the U.S. session is the Federal Reserve’s sale of short-term debt. It’s the last operation of the year under the central bank’s program known as “Operation Twist,” announced in September.
The program’s intended to “put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” policy makers said in a statement that month. Read the Fed statement.
Short-term sales and long-term purchases have occurred several days a week since the program began, without making too many waves day to day. However, in very low trading volume, it’s more likely to push around the market, Lyngen said.
The Fed will release the schedule for the next month of operations on Friday. See current “Operation Twist” schedule.
